UEM disposing stake in Faber?

It was reported in The Edge weekly that UEM is looking to dispose its 34% stake in Faber as part of its on-going asset disposal programme. The article also said speculation in the past was that Pantai was interested in buying Faber because of the common shareholding in Khazanah. Pantai is 60% owned by Khazanah and 40% by Parkway in Singapore.

We are puzzled by the statements in this article as it appears to contradict each other given the common shareholding. Nonetheless, we think ultimately Khazanah would want to consolidate its shareholding in both healthcare providers. In our view, it makes sense for Khazanah to use Faber as the listed vehicle to monetise the embedded value of Pantai's concession whilst also giving the listed entity immediate enlargement in market capitalisation, scale and market penetration. However, any potential disposal or injection will have to be upon renewal of the concession. We expect a decision to be formalised on this by 3QCY10. Both the concessions expire in 2011. Although the mechanism of a potential disposal/consolidation is not known, we expect this piece of news to spur buying interest in Faber.